Archive for Thursday, October 29, 2009

Best economic growth in nearly two years signals U.S recession’s end

October 29, 2009


— The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.

The Commerce Department's report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans.

Still, the much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.

It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.

The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.

Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.

Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.

The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.

The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.

The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.

A top concern is whether the economy can continue to stand on its own feet after government supports are gone.

Many economists predict economic activity won't grow as much in the months ahead as the bracing impact of President Barack Obama's $787 billion package of increased government spending and tax cuts fades.

The National Association for Business Economics thinks growth will slow to a 2.4 percent pace in the current October-December quarter. It expects a 2.5 percent growth rate in the first three months of next year, although other economists believe the pace will be closer to 1 percent.

Christina Romer, Obama's top economist, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year.

Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.

In other encouraging developments, businesses boosted spending on equipment and software at a 1.1 percent pace in the third quarter, the first increase in nearly two years.

Third-quarter activity also was helped by increased sales of U.S.-made goods to customers overseas, as economies in Asia, Europe and elsewhere improved. The cheaper dollar is aiding U.S. exporters, making their goods less expensive to foreign buyers. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996.

Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will led to factories boosting production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months.

Even with the third-quarter improvement, the economy isn't out of the woods yet.

Federal Reserve Chairman Ben Bernanke and members of Obama's economics team have warned that the nascent recovery won't be robust enough to prevent the unemployment rate — now at a 26-year high of 9.8 percent — from rising into next year.

Economists say the jobless rate probably nudged up to 9.9 percent in October and will go as high as 10.5 percent around the middle of next year before declining gradually. The government is scheduled to release the October jobless rate report next week.

With joblessness growing and wages dipping slightly in the third quarter, consumers are expected to turn more restrained in the months ahead. That would put a much heavier burden on America's businesses to keep the recovery going.

To foster the recovery, the Fed is expected to keep a key bank lending rate at record low near zero when it meets next week and probably will hold it there into next year.

With the economy on the mend, the Fed has slowed down some key emergency support programs but doesn't want to pull the plug until the recovery is on firm footing.

Even if the economy climbs back into positive territory in the third quarter, it will be up to another group to declare the recession over. The National Bureau of Economic Research, a panel of academics, is in charge of dating the beginning and ends of recessions. It usually makes it determinations well after the fact.


newmedia 8 years, 5 months ago

And 531,000 new claims for unemployment benefits last week.. mm,mm,mm

just_another_bozo_on_this_bus 8 years, 5 months ago

Only problem with this "recovery" is that it's been little more than a bipartisan effort to prop up the same old house of cards. We still have an economy that's at base little more than a glorified Ponzi scheme.

Shane Garrett 8 years, 5 months ago

Woo Hoo! Oh wait, what did Govenor P. just anounce???

beawolf 8 years, 5 months ago

Wait, wait, I feel it coming....The onslaught of republican denials. It's a liberal media plot, the numbers are skewed, it won't last, Ponzi schemes, demise of the dollar, hyperinflation, death camps, and whatever Beck and Hannity can up with next, etc. etc.

C'mon Tom, I sure you can skew this story to reflect your liberal conspiracy theories.

jimmyjms 8 years, 5 months ago

So, to recap:

No growth, Obama's fault. Growth, Obama's fault.

beawolf 8 years, 5 months ago

"Now it is based on government pork spending. No real growth here. "... Sounds like another economist "wannabe" making assumptions without justification.

remember_username 8 years, 5 months ago

Way to soon to be calling the recession over. This may be just a bounce, so I'll hold my celebration until we make it past next March. If we show continued growth past March I'll breath easier. Unemployment may remain unacceptably high for another year at least, but I think it will always be higher than ideal from here on.

jimmyjms 8 years, 5 months ago

tony88, I agree, but you have to staunch the bleeding before you can overcome these more institutional problems.

MrShades 8 years, 5 months ago

In case you skimmed over these paragraphs

"Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter."

While this is certainly a positive step for the economy, it is based on the Gov't spending money we don't have. Let's save the celebration for a few more qtrs, because...

"Christina Romer, Obama's top economist, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year"

We have not succeeded in securing the "Shovel-Ready" jobs the Stimulus was supposed to provide, and the banks that have money are still very slow to lend it to any business, prohibiting any real growth in manufacturing, or jobs.

This is nothing more than one sunny day in the middle of a bleak winter, enjoy it today, the shine will rub off this penny by tomorrow.

BigPrune 8 years, 5 months ago

The recession is over? Oh yeah, I found $13 extra bucks in my wallet. Now I can buy a decent meal for two at McDonald's. Thanks Obama!

BigPrune 8 years, 5 months ago

Stimulus jobs overstated by thousands

"a mistake that White House officials promise will be corrected in future reports"

death_by_ferret 8 years, 5 months ago

I can't believe nobody has blamed the LPD for the economy's collapse. Yet.

Jimo 8 years, 5 months ago

"temporary and unsustainable"

Yes, in the same way that WWII was a "temporary and unsustainable" solution to the Depression. Actually, this is quite good news seeing that, as naysayers continue to parrot, most of the stimulus is yet to take effect.

Two facts: 1. This is a global recession. Some never dipped into negative territory such as China, Brazil. Some have already recovered such as Australia. Some are almost recovered such as Canada, Germany. The only thing our government can do here is to help hold us over the worst in the short run until the economic medicine here and abroad can take effect.

  1. First quarter GDP was negative 6.4%. Now, we have Third quarter GDP at positive 3.5%. That's a 10% change in half a year, which is one of the most impressive upsurges anywhere on record. It may prove, as one economist put it, a handful of dirt in the grave of recession, but it is a clear and definite positive event.

thepianoman 8 years, 5 months ago

Um...yaaaaa....this recession isn't over...won't be until people are put back to work....Bottom line..end of story.....

The reason for the "slight" growth is because of these programs ath

tbaker 8 years, 5 months ago

If you measure GDP using the expenditures approach:

"The total spending on all final goods and services (Consumption goods and services (C) + Gross Investments (I) + Government Purchases (G) + (Exports (X) - Imports (M))" (from the web)

and then investigate to see which of these metrics actually grew, you'll discover it was government spending that grew. Everything else was stagnate.

Trouble is, the government has no money. Everything they have either comes from us in taxes (which was all spent by last March) or is borrowed from other countries, or is just printed. Growth in GDP driven by government deficit spending is not real GDP growth. These numbers will be adjusted down in the months to come because of this.

Saying this "growth" in GDP signals the end of the recession is disingenuous, and serves as yet another example of politicians (both parties do this) lying to make themselves look good.

Ricky_Vaughn 8 years, 5 months ago

Look at the economy over the last 100 years and its booms. They're all driven by some type of new innovation...steam engines, electricity, computers, the internet, etc.

The POTUS (R or D) has very little influence on the state of the economy.

jamoca 8 years, 5 months ago


This is how your new found messiah is fixing our economy:

Posted for anyone out there with some common sense left in this crazy town.

Ricky_Vaughn 8 years, 5 months ago

@ BlessedSap

See the Iraqi War if you're on that tip.

Shane Garrett 8 years, 5 months ago

Even MSNBC is picking up on how over blown the stimulus package is and how over reporting on job growth has taken place. Of course it will all be corrected in Fridays news.

sfjayhawk 8 years, 5 months ago

Best economic growth in nearly two years signals U.S recession’s end -

Im not buying it at all. I think we still have a long way to go before we can start talking recovery.

tbaker 8 years, 5 months ago

70% of the US economy is consumption in the private sector. That sector isn't growing.

BigPrune 8 years, 5 months ago

A repost of the link from above.

Stimulus jobs overstated by thousands

“a mistake that White House officials promise will be corrected in future reports”

BigPrune 8 years, 5 months ago

link doesn't work again, how strange.......

dlkrm 8 years, 5 months ago

Look at the detail. All of the growth was in government spending. Not an end to the recession at all. But don't let facts stand in the way.

Shane Garrett 8 years, 5 months ago

Try the link at 1:28 it works and just restates ap news report. "stimulus jobs overstated by thousands."

MyName 8 years, 5 months ago

Well at least it's not (more) bad news.

Gareth Skarka 8 years, 5 months ago

9.9% increase across two quarters is the largest rise since 1980.

Spin away, conservatives -- but the simple fact is this: If you're going to blame Obama when the numbers are down, you have to credit him when the numbers are up. As much as it galls you, the stimulus is working -- jobless rates are still way too high, but GDP indicators are that we've avoided slipping into an honest-to-god Depression. That's a good thing, regardless of your party.

BigAl 8 years, 5 months ago

Give credit or blame wherever you want. All I know is that my 401K is coming back. My other investments are back. My business is way up over last year and things are much brighter than they were in January.

I do think the stimulus that started in the Bush administration has helped us avoid a deep depression.

Stimulus, no stimulus, Obama, Bush.... I don't care. I just know that things are MUCH better than they were.

beawolf 8 years, 5 months ago

Big Al,

Your comment was the only one worth reading in this thread. I agree, my 401k is up 20% from last year at this time. Still down 10% but at least I can start thinking about retirement again. I've been told anticipated layoffs at my workplace are now off the table and some new positions will actually get posted. 2 houses recently sold in my neighborhood and both owners were pleased with the price received. I have a new Toyota Corolla (traded in the 94 GMC pick-up) and the wife is actually planning a vacation trip. 6-12 months ago, none of this was reality.

BigAl 8 years, 5 months ago

If Beawolf and my 401K's are up, chances are a lot of people are in the same situation. We just don't think it is all doom and gloom. There are some bright spots on the economy and if focusing on them causes some of you concern, then go ahead and wallow in your self pity. The rest of us are trying to move on and get this country going again.

Scott Drummond 8 years, 5 months ago

"Look at the detail. All of the growth was in government spending. Not an end to the recession at all. But don't let facts stand in the way."

Of course it was, and it is working just as it was intended. After bush and republicans drove the economy in a ditch consumer confidence nosedived. Since we are now largely a services and consumer driven nation (thank you again republicans) a crisis in confidence has horrible consequences. Worried people significantly cut their spending on services and consumer goods in order to save money for expected hard time and paying down bills. This only fuels the downturn and worsens the experience. Our government undertook the stimulus to end that downward spiral. As the stimulus money works its way through the economy (and the effect is just beginning) more people will have money and jobs, will begin to feel more comfortable and will start to spend. The republicans think that if you ensure that rich people have a greater share of the wealth in this nation they will spend and the benefit will trickle down on the middle class. Obama and the Democrats are operating from the assumption that less concentration of wealth will allow the money to trickle up and through our economic system. We are about to see who is correct. I expect a great deal of squirming from some camps.

tbaker 8 years, 5 months ago

We wouldn't be having this debate if the politicians would have simply given us a 6 month income tax holiday (about equivalent to the amount of the stimulus bill) instead of adding 3/4 of a trillion dollars to the national debt.

When the government spends our money - we can't. The transfer (looting?) of resources from the productive sector of our economy (70% of the US economy is in the private sector) to government means (ultimately) less money for the private sector to save, invest, and spend on goods and services. Since the government use of the money is an order of magnitude less efficient than the private sector, only a fraction of the good that could have been realized by the use of said money is realized. Letting us keep more of the money we earn (tax holiday) has a much more positive effect on the economy than sending the money to DC an letting the politicians decide how to spend it.

Godot 8 years, 5 months ago

"There are some who say that the stimulus has not resulted in more jobs, that it is a waste of money; let me be clear; these naysayers are fooling you. They will say that the increase in the GDP was created by government spending that cannot be sustained. They say that for every clunker that was traded in, the taxpayers spent over $24,000. Do not believe them! The lie! They also will say that one out of every three home purchases under the $8000 refundable home buyer credit was fraudulent, and that now the government has to spend more money to investigate and prosecute the fraudsters. That, too, is a lie. These unpatriotic naysayers do not have your best interests at heart. I do. I know what you feel. I know your needs. They do not. I will bring you the health care you so richly deserve, I will keep the insurance companies honest, I will stop the money grubbing doctors from cutting off your grandfather's feet for profit, I will end the pharmaceutical companies' ungodly practice of rushing products to the market without sufficient time to test the drugs and vaccines, I will bring you the health care you deserve and you will not have to pay one penny more in taxes, not one. Now, let me be perfectly clear, despite what others say, under my plan, which I have not yet formulated, if you like the health care you have now, you will not be required to give it up. "

said, over and over again, by your (not mine) Dear Leader.

I have heard this before. The phrase, "I am not a crook," comes to mind.

Gareth Skarka 8 years, 5 months ago

Godot: "I am not a crook,"

Hmmm... a Nixon comparison.

Let's see.... a Republican who engaged in illegal surveillance operations, kept an enemies list, started military operations against a country that had not attacked us, and left the office in disgrace.

Which recent President does that sound like again?

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